Correlation Between Income Stock and Emerging Markets
Can any of the company-specific risk be diversified away by investing in both Income Stock and Emerging Markets at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Income Stock and Emerging Markets into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Income Stock Fund and Emerging Markets Fund, you can compare the effects of market volatilities on Income Stock and Emerging Markets and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Income Stock with a short position of Emerging Markets. Check out your portfolio center. Please also check ongoing floating volatility patterns of Income Stock and Emerging Markets.
Diversification Opportunities for Income Stock and Emerging Markets
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Income and Emerging is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Income Stock Fund and Emerging Markets Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerging Markets and Income Stock is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Income Stock Fund are associated (or correlated) with Emerging Markets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerging Markets has no effect on the direction of Income Stock i.e., Income Stock and Emerging Markets go up and down completely randomly.
Pair Corralation between Income Stock and Emerging Markets
Assuming the 90 days horizon Income Stock is expected to generate 1.75 times less return on investment than Emerging Markets. In addition to that, Income Stock is 1.07 times more volatile than Emerging Markets Fund. It trades about 0.2 of its total potential returns per unit of risk. Emerging Markets Fund is currently generating about 0.37 per unit of volatility. If you would invest 2,034 in Emerging Markets Fund on April 22, 2025 and sell it today you would earn a total of 359.00 from holding Emerging Markets Fund or generate 17.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Income Stock Fund vs. Emerging Markets Fund
Performance |
| Timeline |
| Income Stock |
| Emerging Markets |
Income Stock and Emerging Markets Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Income Stock and Emerging Markets
The main advantage of trading using opposite Income Stock and Emerging Markets positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Income Stock position performs unexpectedly, Emerging Markets can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Emerging Markets will offset losses from the drop in Emerging Markets' long position.| Income Stock vs. Icon Information Technology | Income Stock vs. Hennessy Technology Fund | Income Stock vs. Nationwide Bailard Technology | Income Stock vs. Dreyfus Technology Growth |
| Emerging Markets vs. Virtus Seix Government | Emerging Markets vs. Dunham Porategovernment Bond | Emerging Markets vs. Lord Abbett Intermediate | Emerging Markets vs. Morningstar Municipal Bond |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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